M&A needs more motivation to accelerate

Over the past decade, the merger and acquisition (M&A) has made steady growth, gradually becoming an important part of Vietnam's investment and business ecosystem.

However, in order to really break through, the M&A market in Vietnam is expected to drastically change from the process of issuing and implementing policies to connecting activities, business execution and innovation in buyers and sellers.

The above information was given by management agencies and experts at the M&A Vietnam Forum 2019 taking place on the 6th of August in Ho Chi Minh City.

Mr. Vu Dai Thang, Deputy Minister of Planning and Investment, spoke at the forum

According to Vu Dai Thang, Deputy Minister of Planning and Investment, M&A activities have grown steadily and become an important trend in investment activities in Vietnam.

If in 2009, the total value of M&A deals was only USD 1.1 billion, by 2018 this figure has exceeded the record of USD 10.2 billion, bringing the total value of transactions in the past decade to about 55 billion USD, according to statistics of M&A Forum Vietnam.

Not only has the record of total value, the number of deals also increased rapidly, taking place in every business sector, from private, foreign investment to state-owned enterprises. M&A attracts not only domestic and foreign professional financial investors, but also the active participation of manufacturing, business and technology enterprises... This demonstrates the maturity as well as the potential of Vietnam's M&A market.

Markets that want to break out need to have big deals to attract large capital flows from professional foreign investors, such as Sabeco, Vinamilk and Vinaconex. However, how to accelerate the equitization process, divestments to attract large M&A deals, attract reputable foreign investors to jump in is a problem that needs to be removed.

Equitisation is slow

Mr. Dang Quyet Tien, Director of the Enterprise Finance Department (Ministry of Finance), said that over the past time, the number of equitized SOEs has slowed down, but the quality of equitized enterprises are getting better. Investors have invested in higher value deals, proving that confidence is increasing in the market.

Talking about the reason for equitization, the divestment of state-owned enterprises slowed down, Mr. Tien said that the biggest problem was land. There are many businesses after equitization, investors who carry out procedures for transfer of land use rights face difficulties because the land is not legally clear. Therefore, the equitization process needs to be slowed down to review, ensure the interests of investors and determine what assets they have, especially those that are real real estate of the business.

According to Mr. Le Song Lai, Deputy General Director of State Capital Investment Corporation (SCIC), SCIC has been operating for 12 years, divesting over 900 enterprises, on average, over 70 enterprises each year. The revenue brought to the State is over VND 47,000 billion.

However, in the last two years, the divestment has slowed down. In the first six months of 2019, only successful divestments in four enterprises.

Although the quality and amount of money collected is still effective compared to the cost price, but the quantity has not reached the plan for many reasons. In addition to the subjective reasons of enterprises, the regulations on divestments in recent times, although the authorities have made efforts, they still have to be amended, supplemented and completed.

Remove the policy

Mr. Tien said that the management agencies are trying to narrow the State enterprises to review and announce clearly that the State enterprises will sell in large quantities, especially large-scale enterprises such as telecommunications and transportation services, the airline will also proceed to sell in large quantities so that the sale rate is large enough for investors to participate.

Mr. Tien also said that in the coming time, there will be talks with international consulting companies on barriers to find ways to remove them to penetrate more into Vietnam market. On the other hand, moving towards renewing the equitization mechanism in the direction that equitized enterprises will have to be listed on the stock market, not waiting for a new listing.

The Ministry of Finance is piloting so that by 2021, international accounting standards will be applied to large-scale state-owned enterprises so that equitization will be consistent with international policies.

SCIC's Mr. Lai said that the current divestments of state-owned enterprises often include public auctions, if unsuccessful, they will offer competitive prices. With that process, many cases of the role of consulting companies, especially big deals, are very difficult.

“This process, many cases are not in line with international practices, especially the special review period for businesses. Because investors spend a lot of money without special review, it is very difficult for the market to develop, except for investors who are familiar with this process”,Mr. Lai said, also addes that the process of selling shares the state should be closer to international practices.

Currently, the issue of land entanglement is not only in equitization, but also in the valuation of enterprises to divest after equitization. Many land banks have no complete papers, only land lease contracts, even contracts that have expired but the locality continues to agree to land use and can be revoked at any time. This case is difficult to price.

Mr. Lai said that there had been 15 years of equitization of a state-owned enterprise, but the land document was only a land lease contract, a receipt of land use levy... legal papers, the actual value will be much higher. Therefore, in the coming time, it is necessary to continue reviewing and handling this issue.

According to T. Kieu